Investor Relations

Contact Private Wealth

Email Private Wealth

Share

Derivatives Trading

We translate the firm’s research ideas into actionable trading and investment ideas, strategies and structures.

What are Derivatives?

A derivative is a financial instrument whose value depends on the value of one or more underlying assets and is generally used as protection against risk. Its value will therefore change based on changes in the underlying assets. The main categories of derivatives are futures, options and swaps. The key benefits of derivatives are their liquidity and low costs.

We offer a full advice and brokerage service on derivative shares.

We help ensure that you benefit from the best prices and service through our experience and expertise. Our trading services include:

Local and international single stock futures

Index futures

Commodity futures

Currency futures

Single Stock Futures

A future is an agreement between a buyer and a seller to trade a certain instrument at a fixed price, at a future date. A single stock future is a future where the underlying security is a share listed on a stock exchange. In South Africa, these futures are available on all liquid shares listed on the JSE. The contract is a legally binding commitment made by a futures exchange to buy or sell a single share in the future. The liquidity of single stock futures depends on the liquidity of the underlying shares.

The advantages of single stock futures

Lower trading cost: You don't pay uncertified securities tax (UST) when you buy single stock futures. Depending on the size of the transaction, the broker's payment is usually lower than in the case of direct shares, depending on the size of the transaction.

Gearing: This is your fund position at institutional funding rates which are typically 3% lower than the prime rate. Margin transactions can be used to increase the position or to release cash.

Short-selling: You can sell shares that are overvalued and make a profit when the share price drops. This method of trading was previously only available to investment banks, hedge fund managers and share brokers, but private investors can now also make use of this opportunity.

Hedging: You can hedge individual shares or a share portfolio against market fluctuations without having to sell your original investment.

The liquidity of index futures: The only liquid index future available locally is based on the FTSE/JSE Top 40 Index. Because of the extremely liquid nature of these types of investments, large volumes of Top 40 Index futures can be traded at a reasonable price without any major impact on the market.

Margin and valuation against market price: You don't have to pay for or deliver the full security after trading if you have a term contract in place. You only have to deposit 10% of a term contract's value of trade (known as an initial margin) to cover any potential losses when you trade. There is also a maintenance margin payable to the broker to cover small detrimental movements.

Our equity derivative trading desk is based at our corporate office in Cape Town. We are a registered member of the South African Futures Exchange (SAFEX), the JSE's Equity Derivative Trading Desk.

Would you like to know more about our derivatives service?

Complete the form on the right and one of ourspecialists will contact you.